Tradeview CEO Ng Zhu Hann told FMT Business that as long as the catalysts include signs of a recovery in the global market and there is political stability, the FTSE Bursa Malaysia KLCI (FBM KLCI) is likely to revisit the 1,550 point mark.
Rakuten vice-president Thong Pak Leng is even more optimistic, betting on the possibility that the KLCI may even rise as high as 1,670 points.
However, talks of early elections and political uncertainty have spooked investors. Malaysia is not due to go to the polls until September next year.
“The KLCI’s median for the past 30 years has been 15.6x while we trade at 14x at the 1,430-point mark,” Ng said.
“However, if the country’s political uncertainty continues, there is a possibility that the KLCI may slip to a low of 1,380 to 1,400-point zone,” he added.
He also dismissed talks that the KLCI is now in a bearish mode. “The KLCI has slipped 8% year-to-date, but from the peak of 2020, it has fallen more than 10%, which puts it in correction territory now,” he said.
Ng added that if local funds continue to stay away, the KLCI may slip further, possibly by more than 20%. “That would then make it a bear market,” he said. “But I don’t believe it will come to that.”
For uncertain times such as now, he said, retail investors should remain calm rather than rush to take positions.
“Instead they should now look at the longer term investment horizon of three to five years and start looking at stable dividend-yielding stocks,” Ng said.
He recommended sectors such as banking, healthcare and fast-moving consumer goods as better bets during times of uncertainties. “These are resilient and essential sectors,” he pointed out.
Ng singled out Apex Healthcare, Allianz Malaysia Bhd, Syarikat Takaful Malaysia Keluarga Bhd and Alliance Bank Malaysia Bhd as good choices for retail investors.
Rakuten vice-president Thong Pak Leng also agrees that the local bourse will trend upwards in the second half of 2022 despite the serious impact of global uncertainties, primarily in the US.
“The local bourse is currently trading at a discounted price earnings ratio (PER) of more than 20% from a five-year historical average. Similarly, regional valuations are also below their respective historical average,” Thong said.
He said the KLCI could possibly touch 1,670 by year end on the belief that “a flight of funds” back to Asia is imminent in the event of heightened uncertainties on Wall Street.
“Most markets, if not all, are still trading close to their 2007-2019 average compared to 2022 valuations, indicating that regional markets have not made any significant uptrend thus far,” Thong said.
He anticipates that foreign funds will help to provide added liquidity to the market on the back of a weak ringgit which may act as an incentive for them to look at Malaysia.
Thus, the KLCI could possibly touch 1,670 by year-end, premised on a very reasonable 13.5x FY2022 PER while helping to strengthen the ringgit to around RM4.15 to RM4.20 against the greenback.
Thong agreed that investors must stay defensive and look to sectors that are less volatile such as banking, utilities and telecommunications.
He advised investors to look at stocks such as Malayan Banking Bhd, Tenaga Nasional Bhd, Axiata Group Bhd and Digi.com Bhd.